Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”), and Rule 19b-4 thereunder, notice is hereby given that on April 26, 2002, the Chicago Stock Exchange, Incorporated (“CHX” or “Exchange”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I, II and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.
I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change
The CHX proposes to amend the rules relating to the composition of the CHX's Minor Rule Violation Panel (“Panel”). The text of the proposed rule change is below. Proposed additions are in italics; proposed deletions are in brackets. Start Printed Page 35603
Discipline and Trial Proceedings
Minor Rule Violations
RULE 9.(a) No change in text.
(b) Procedure for Imposing Fines. In the event that the staff of the Exchange determines that a member, member organization, associated person or registered or non-registered employee of a member or member organization has violated a rule of the Exchange set forth in paragraph (h) of this Rule, and the Exchange staff desires to take action under this Rule 9, the staff shall present the facts supporting the violative conduct to [the] a Minor Rule Violation Panel. The accused shall not have the right to attend such presentation nor shall the accused have the right to present any evidence or testimony at such presentation. [The] A Minor Rule Violation Panel may (i) accept the staff's recommendation and impose sanctions on behalf of the Exchange in accordance with this Rule 9, (ii) reject the staff's recommendation, or (iii) recommend that the Exchange commence a formal disciplinary proceeding. [The] A Minor Rule Violation Panel shall have no authority, however, to authorize the initiation of a formal disciplinary proceeding. In the event [the] a Minor Rule Violation Panel recommends that the Exchange commence a formal disciplinary proceeding, the staff shall either (i) issue a report to the Chief Executive Officer in accordance with Article XII, Rule 1(a), recommending that formal charges be brought or (ii) advise the Minor Rule Violation Panel that the staff will not recommend that the Exchange commence a formal disciplinary proceeding. In the event that the staff chooses alternative (ii) from the preceding sentence, the matter shall be returned to the Minor Rule Violation Panel that recommended the commencement of the formal disciplinary proceeding, which shall then impose a fine in accordance with the provisions of this Rule 9.
[The] One or more Minor Rule Violation Panel s shall be appointed, from time to time, by the Chief Executive Officer and shall each consist of three persons—one member of the Rules Subcommittee of the Committee on Floor Procedure, one member of the Committee on Floor Procedure [who is not a member of the Rules Subcommittee], and one floor member who is not a member of the Committee on Floor Procedure or the Rules Subcommittee [any of its subcommittees].
Notwithstanding anything in this paragraph (b) to the contrary, the Committee on Floor Procedure shall have jurisdiction to impose a fine pursuant to this Rule for violations of (h)(ii)(7) and (8) of this Rule relating to decorum on the trading floor. However, the Committee on Floor Procedure and [the] a Minor Rule Violation Panel shall not, collectively, impose more than one fine pursuant to this Rule 9 relating to the same underlying violation and incident.
(c)-(h) No change in text.
II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for its proposal and discussed any comments it received regarding the proposal. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B and C below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change
The Exchange proposes to amend the rules relating to the composition of the Panel. The Panel is a three-person group charged with evaluating rule violations that fall under the Exchange's Minor Rule Violation Plan and assessing fines in response to that conduct.
The proposed rule change would allow the appointment of additional Panels. In recent months, it has become increasingly difficult for Panel members to balance their responsibilities as Panel members with their responsibilities as active members of the trading floor community. The ability to appoint additional Panels would relieve some of the workload of the current Panel members and ensure that potential minor rule violations are heard by a Panel as soon as possible. The Exchange's Market Regulation staff will work with each Panel to ensure that their decisions provide consistent sanctions for similar offenses.
The proposed rule change also would remove a current restriction on the composition of the Panel that makes it difficult to find a sufficient number of persons to serve as a member of this group. Under the current rules, the Panel consists of: (1) One member of the Rules Subcommittee; (2) one member of the Committee on Floor Procedure who is not on the Rules Subcommittee; and (3) one floor member who is not on the Committee on Floor Procedure or on any of its subcommittees (such as the Rules Subcommittee).
The proposed rule change would modify this composition so that the Panel would consist of: (1) One member of the Rules Subcommittee; (2) one member of the Committee on Floor Procedure (whether or not he or she is on the Rules Subcommittee); and (3) one floor member who is not on the Committee on Floor Procedure, but could be on one or more of its subcommittees (but not the Rules Subcommittee).
In recent years, the Exchange's floor members have become more active on various Exchange committees, including on the various subcommittees of the Committee on Floor Procedure. As a result, they often are not eligible to fill the second or third positions on the Panel. The proposed rule change would help ensure that a sufficient number of members are eligible to be selected to serve on the Panel.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder that are applicable to a national securities exchange and, in particular, with the requirements of Section 6(b). In particular, the CHX believes the proposed rule change is consistent with Section 6(b)(5) of the Act  in that it is designed to promote just and equitable principles of trade, to remove impediments and to perfect the mechanism of a free and open market and a national market system and, in general, to protect investors and the public interest by ensuring that potential minor rule violations are addressed as soon as possible.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will impose any inappropriate burden on competition. Start Printed Page 35604
C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action
Within 35 days of the date of publication of this notice in the Federal Register or within such longer period (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the CHX consents, the Commission will:
(A) By order approve the proposed rule change, or
(B) Institute proceedings to determine whether the proposed rule change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposal is consistent with the Act. Persons making written submissions should file six copies thereof with the Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington DC 20549-0609. Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for inspection and copying at the Commission's Public Reference Room. Copies of such filings will also be available for inspection and copying at the principal office of the Exchange. All submissions should refer to File No. SR-CHX-2002-12 and should be submitted by June 10, 2002.Start Signature
For the Commission, by the Division of Market Regulation, pursuant to delegated authority.
Margaret H. McFarland,
3. The Committee on Floor Procedure has several subcommittees, including the Rules Subcommittee, the Floor Broker Technical Subcommittee, the Specialist Technical Subcommittee and the Space Allocation Subcommittee.Back to Citation
[FR Doc. 02-12568 Filed 5-17-02; 8:45 am]
BILLING CODE 8010-01-U